The Vancouver-based trio, consisting of Jim Scott, David Solloway and Dix Lawson, aim to launch Canada Jetlines Ltd., modeled after the success of other similar budget carriers, like Ryanair, Allegiant and Spirit Airlines.

David Newman, Cormark Securities analyst, said the launch of an ultra-low cost competitor in Canada is not overly surprising given the industry’s relatively strong fundamentals, the soaring earnings, WestJet’s strategic initiatives to appeal to a broader array of travellers, including business, and the backdrop of an improving economy.

In the U.S., ultra-low cost carriers like Spirit and Allegiant have recognized industry-leading margins by stimulating low-yielding traffic with low fares, he said.

They have been able to do so because of their extremely lower cost structure.

“Spirit essentially came in to the low end of the market that was previously occupied by Southwest Airlines, which pursued more of a full-service strategy. Jetlines hopes to replicate this success in Canada as WestJet pursues more of a full-service strategy,” Mr. Newman said in a note to clients.

But pushing ahead with the plan is not without a sizable risk, he said. The Canadian airline industry has not been kind to new airlines, with the exception of Porter Airlines, in recent years, in part, because of its defensible position on the Toronto Island, he said.

For certain, the history of Canadian aviation is littered with the remains of several failed competitors, including JetsGo, Canada 3000, and Roots Air.

Tim Morgan, chief executive of charter operator Enerjet and one of the founders of WestJet, has a lot of experience in launching low-cost alternatives.

Enerjet launched in 2009 with an eye for breaking into the charter travel market to sun destinations but eventually found the company’s bread and butter in transporting oil sands workers.

Rumours have been circulating that Enerjet was interested in breaking into the ultra-low cost market after hiring a new president, David Lancelot, and new chief commercial officer, Cameron Trant, who are former executives at Spirit Airlines.

“Right now, we have no comment on that stuff,” Mr. Morgan said in an interview.

But he added that if the right opportunity came along, he’d look at it.

Vancouver’s Salman Partners has agreed to raise $100-million in financing to get Jetlines off the ground, according to the airline’s management.

“Raising $100-million in this market, no matter what airline you have, would be difficult,” Mr. Morgan said. “We kind of thought of that number two years ago, and there was just no appetite. To tell you the truth, it’s not much different now.”

At the core of Jetlines business model is the belief that ultra-low cost carrier’s can derive as much as 40% of their total sales from ancillary revenues by unbundling and selling only services the customers want to them.

But the “low-cost” is as much about their cost structure as the fares they offer. Ultra-low cost carriers rely on the cost creeping up over time at older airlines, as has occurred at Air Canada and WestJet, so they can undercut the market.

In Canada, the challenge has always been the higher taxes and fees on aviation and the smaller population here.

At the same time, both WestJet and Air Canada have recognized their creeping costs and implemented measures to contain them, including launching their own low-cost subsidiaries Encore and Rouge respectively this year.

In its business plan, Jetlines plans to recover the higher fees in Canada as an “ATC surcharge” and by garnering ancillary revenue per flight on average of 18% by charging for things like premium economy seats, in-flight snacks and drinks, and renting iPads, and even things like onboard nanny services.

Kevin Chiang, CIBC World Markets analyst, said Jetlines will still have its challenges.

“Never say never,” he said. “Whether they can make money to doing it, I’m not sure.”

He said Jetlines could expect the larger carriers to use their larger networks and fleets to try to squeeze the new entrant out of the market.